As gold trades near its lowest price for 2018, this Canadian miner is well positioned for a recovery.
The company has four operating mines on three continents, and interests in two projects in Quebec that have produced very encouraging exploration and drilling results. The first of these projects could begin production within three years. Strong cash flow will help the company develop those projects and boost production at its existing mines.
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IAMGOLD (Toronto symbol IMG; www.iamgold.com) owns 41% of the Sadiola gold 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.
IAMGold also holds 92.5% of the Cote gold project in Ontario. Production at that deposit could begin as early as 2021. A recent feasibility study indicated a 23% increase in proven and probable reserves for the project.
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, including a 50/50 joint venture with IAMGold to develop the Monster Lake field, 50 km southwest of Chibougamau, Quebec.
The company continues to report positive results from the exploration of the Monster Lake field. The project comprises 114 mineral claims covering an area of 3,336 hectares. It lies 44 kilometres southwest of the town of Chibougamau in northwestern Quebec. The property is easily accessible by road, and a high-voltage transmission line crosses near the site.
IAMGold drilled 8,282 metres in its 2018 winter drilling program. The results revealed several high-grade mineral showings. They include a 2.62-metre drilling section that was graded at a very high 72.17 grams of gold per tonne.
The company plans to keep drilling on the project. IAMGold holds an option to increase its interest in Monster Lake to 75% by spending a total of $10 million.
Mining Stocks: High cash reserves will help pay down debt and undertake expansion projects
In the quarter ended June 30, 2018, overall revenue rose 1.1%, to $277.4 million from $274.5 million a year earlier. (All figures in U.S. dollars.) Cash flow increased 8.1%, to $73.4 million, or $0.16 a share, from $67.9 million, or $0.15.
The company’s gold production fell 4.0% in the second quarter, to 214,000 ounces from 223,000 a year earlier. The decline came from planned maintenance shutdowns at the Essakane and Rosebel mines during that quarter. Last week, the company reported a work stoppage at the Rosebel mine. The action came as a surprise, since a new labour agreement was signed in September 2018. IAMGold has taken legal action to end the strike.
IAMGold holds a high $744.5 million in cash. Those reserves put it in a strong position to pay down its long-term debt of $393.7 million. It also gives it the funds to build the Cote mine and undertake expansion projects.
While the company already holds interests in four operating mines, it’s important for miners to keep exploring and developing new projects. That’s especially true for properties in politically stable countries like Canada.
Like most gold stocks, the company’s shares are heavily influenced by gold prices. As a result, they have dropped this year as gold moved down. Still, IAMGold’s strong cash flow and rising production outlook give it speculative appeal.
We will cover IAMGold’s third quarter earnings in a future issue of Stock Pickers Digest.
Recommendation in Stock Pickers Digest: IAMGold is a buy.
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