IAMGOLD $3.71 (Toronto symbol IMG; TSINetwork Rating: Speculative) (1-888-464-9999; www.iamgold.com; Shares outstanding: 376.6 million; Market cap: $1.4 billion; No dividends paid) owns 41% of the Sadiola mine and 40% of the Yatela mine, both located in Mali; 90% of its Essakane gold mine in Burkina Faso; 100% of the Doyon mine in Quebec; and 95% of the Rosebel mine in Suriname, South America.
In addition, IAMGold has a 1% royalty interest in the Diavik diamond mine in the Northwest Territories. It also owns the Niobec niobium mine in Quebec. When used as an additive, niobium makes steel stronger, more heat-resistant and easier to weld.
In the three months ended March 31, 2014, IAMGold’s revenue fell 8.5%, to $279.3 million from $305.3 million a year earlier. Cash flow per share dropped to $0.17 from $0.31. The declines were mostly due to 21.2% lower gold prices and an 8.5% production decrease.
IAMGold’s production outlook is positive, and it is cutting its risk by diversifying away from Africa. In 2012, it acquired the Côté Lake gold project, between Timmins and Sudbury, when it bought Trelawney Mining and Exploration for $608 million. Côté Lake holds an estimated 8 million ounces of gold, and there’s lots of room for more drilling to further expand the project’s reserves.
The company suspended its dividend payments in December 2013 to conserve cash while it waits for gold prices to recover. But meanwhile, it holds cash and gold bullion of $313.9 million, so it has the funds to develop Côté Lake and add to its other mines’ reserves. It’s also cutting costs to keep its cash flow positive despite lower gold prices.
IAMGold is a buy.
