Iamgold Corp. (IAG, Financial) provides the market with an update concerning the development of the Saramacca project which is in Suriname, not so far from Rosebel Mine.
The Canadian miner has published on its web site the results of 29 drillings that its exploration team conducted on the site according to the company’s infill drilling program for 2017.
The most relevant results from the hole drillings are highlighted as follows:
SMDD17-077: 60.5 meters grading 40.91 g/t Au
Including: 19.5 meters grading 75.91 g/t Au
SMDD17-084: 20.0 meters grading 4.26 g/t Au
and 19.5 meters grading 9.66 g/t Au
SMDD17-068: 16.7 meters grading 9.93 g/t Au
SMDD17-091: 23.5 meters grading 7.41 g/t Au
SMDD17-074: 32.6 meters grading 4.05 g/t Au
and 17.75 meters grading 6.65 g/t Au
SMDD17-085: 52.6 meters grading 5.33 g/t Au
(source: Iamgold’s news release)
What do these drilling results mean?
Let’s consider the results from the hole SMDD17-077 since they look very promising. From this diamond drill hole, Iamgold’s exploration team found a 60.5 meters’ deposit of worthwhile minerals and they have also found a richer 19.5 meters’ ore subset in the wider part of the mineralized area. Furthermore, the mineralized body is characterized by an amazing concentration of gold: 40.91 grams of gold per tonne of ore in the 60.5 meters’ ore deposit and 75.91 grams per tonne of ore in its subspace.
The gold grade measures the concentration of metal in the mineral. It is a very important measure because the higher the grade is, the lower the costs are, associated to the extraction and the processing of one ounce of gold from the ore body and vice versa.
We cannot make any forecast about how many ounces of gold the miner can add to the company’s future production from Saramacca because the exploration team needs to make further drillings on the area which is still open along strike. This is good news because it means that the end of mineralization has not been found yet at Saramacca, which is also still open at depth. In addition, the company must complete a National Instrument 43-101. The first impression that we can get from the results of these drilling tests is that Iamgold is shaping a high-grade deposit at Saramacca since the underground is characterized by “irregular pyrite-quartz-carbonate veins which locally carry high gold grades,” the company says. If these results will be confirmed or even improved from further drillings, the Canadian miner can start to define a much higher potential bearing gold deposit at Saramacca than initially expected.
When the miner acquired the property, it expected that Saramacca would bring to operations a “potential of between 8 million and 40 million tonnes grading between 1.0 and 1.8 g/t Au for potentially 500,000 to 1.4 million contained ounces of gold,” as suggested by previous exploration activities undertaken in the area, Iamgold reports.
The miner will make a National Instrument 43-101 available to investors before the end of the third quarter of 2017. The document will contain an estimate of the resources that exploration activities will define at Saramacca once a total number up to 17,000 drillings is completed on the site.
The document will also provide investors with information about the geometry of the ore deposit. If the results show a prevalence of a horizontal or vertical ore deposit to an odd-shaped ore deposit or to a deposit that lies at an angle, it will be much better since the costs will be lower related to the mining process.
The National Instrument 43-101 will also report the metallurgic test results, the cost to transport the fuel to the mine site, energy costs, the cost to build a permanent camp, etc. Given the proximity of Saramacca to the operating Rosebel mine – they are only 25 kilometers apart – we can be confident that Saramacca will not require Iamgold to spend too much in hiring skilled labor forces, transportation and energy costs. Most of the right staff, personnel and machinery, as well as the availability of power grid, water sources necessary for mining activities and communication routes are already there.
Why are these results important to Iamgold’s shareholders?
Steve Letwin, Iamgold’s president and CEO, commented, “These drill results exceed what we expected when we acquired the rights to the Saramacca property and lead us to believe that this deposit has the potential to create significant value for all stakeholders with a vested interest in the future of Rosebel, including our shareholders and the government of Suriname”.
According to the agreement between Iamgold Ă‚ and Suriname, the Canadian miner would hold through Rosebel a 70% interest in Saramacca while the Surinamese government held a 30% interest.
Letwin added, “What is now becoming Saramacca's most compelling feature is the high grades that we've intercepted to date. We intend to declare a resource this year which would then enable us to develop our plans to bring Saramacca into the mine feed as quickly as possible."
Iamgold is currently trading at $3.93 per share with a price to sales ratio of 1.89 and a price-book (P/B) value ratio of 0.80. The gold stock closed down 5 cents or minus 1.26% Thursday from the previous trading day with a volume of 4,723,955 shares traded on the New York Stock Exchange versus an average volume of 6.96 million shares traded over the last 10 trading days and an average volume of 10.11 million shares traded over the last three months.
The gold company has a market capitalization of $1.87 billion and an Enterprise Value of $1.6 billion for an EV-EBITDA ratio of 5.31. The recommendation rating for Iamgold is 2.8 which ranges between 1.0 (Strong Buy) and 5.0 (Sell). The average target price per share is $5.28 which represents a 34.4% upside from the current share price.
Disclosure: I have no positions in Iamgold.
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