Today, we examine a Canadian gold mining stock that we view as a buy for more aggressive investors. IAMGold is now focused on its gold mines following the sales of a niobum mine in Quebec and its royalty on a diamond mine in the Northwest Territories. The company is looking for further growth as it engages in talks to increase its stakes in two gold mines in western Africa. With $800 million U.S. in cash, IAMGold is in a good position to invest more in its current mines, or make further acquisitions.
IAMGOLD (Toronto symbol IMG; www.iamgold.com) is a Toronto-based mining company with four operating gold mines on three continents, with properties in North and South America and Africa.
Earlier this year, IAMGold sold its 1% revenue royalty on the Diavik diamond mine in the Northwest Territories to Sandstorm Gold Ltd. (symbol SSL on Toronto).
Diavik is Canada’s largest diamond mine and has been in operation since 2003.
Sandstorm paid $52.5 million U.S. in cash plus three million warrants. IAMGold can exercise the warrants for up to five years after production from a new zone at Diavik starts up. The exercise price is $4.50; Sandstorm currently trades at $3.68.
This deal, as well as the January 2015 sale of its Niobec niobium mine in Quebec, leaves IAMGold focused on its gold mines.
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Mining stocks: IAMGold looks to gain controlling stake in two gold mines in Mali
The company is in talks with South Africa-based AngloGold Ashanti to buy that company’s stakes in two gold mines in Mali in which they are partners.
IAMGold and AngloGold each own 41% percent of the Sadiola mine in southwestern Mali. The companies also each own 40% of the nearby Yatela mine. The government of Mali owns the remaining stakes in each project.
AngloGold is facing pressure to cut its debt through asset sales. As well, the Sadiola mine is expanding into a new hard-rock zone and will require additional investment.
With its reserves of cash and gold, IAMGold is in a strong position to buy out AngloGold’s interests in Sadiola and Yatela or make other acquisitions.
Elsewhere in the same region, IAMGold believes Burkina Faso’s upcoming parliamentary vote on an updated mining code will have no effect on the company’s Essakane mine’s profits.
Burkina Faso, a landlocked nation in West Africa, is that continent’s fourth-largest gold producer; the precious metal accounts for about 20% of its gross domestic product.
The new code is expected to abolish a 10% tax break on miners’ profits. However, Burkina Faso will honour clauses in existing deals. As well, the new code should also end uncertainty surrounding the current 12-year-old mining regulations.
IAMGold holds over $800 million U.S of cash and gold. That puts it in a strong position to pay down its long-term debt of $642 million U.S. It could also invest in its current mines or make acquisitions.
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