Iamgold Corp. (IAG, Financial) informed its shareholders of the financial and operating results for the third quarter through a news release published on its website Nov. 8.
Despite a lower gold price that Iamgold realized from the sale of one ounce of gold ($1,284 in third-quarter 2017 versus $1,326 in third-quarter 2016) and a lower amount of production stripping costs that were capitalized at Essakane mine and Rosebel mine, which together caused a significant drop of $99 in the gold margin to $513 per ounce, the Canadian midtier gold producer beat expectations on earnings – adjusted to one-time charges – by 6 cents per share.
Iamgold was also capable of closing the quarter in question with a higher bottom line compared to the prior-year quarter: The Canadian miner reported a net profit of 7 cents per share or a net profit of $33.7 million versus an EPS of 5 cents or a net profit of $21.8 million in the comparable of fiscal 2016.
The company says that net earnings – not adjusted and attributable to equity holders – were $30.8 million or 7 cents per share in the third quarter, up from $17.0 million or 4 cents per share in third-quarter 2016.
But the company was not able to beat expectations on third-quarter revenue. Iamgold’s revenue came in at $268.8 million and on this nearly 5% year-over-year lower sales figure the company missed expectations by $4.11 million.
If we consider that in the third quarter the company sold a lower volume of ounces of gold of 210,000 compared to an amount of 212,000 ounces of gold sold in the third quarter of 2016 and that revenue went down 4.8% on a year-over-year basis to $4.11 million, the increase in the bottom line is mainly explained by lower royalty expenses, by a reduced amount of noncash charges for depreciation, by lower general and administrative expenses, by a lower amount of finance costs sustained and lower income taxes.
The gold production – attributable to Iamgold – was 217,000 ounces in the third quarter versus a gold production of 210,000 ounces in third-quarter 2016. Increased volumes at Westwood mine (Canada) and Rosebel (Suriname) more than offset the negative effect on the quarterly production of the yellow metal due to lower grades of ore mined at Essakane mine (Burkina Faso) and Sadiola mine (Mali).
The all-in sustaining cost was $969 per ounce of metal sold and was $77 lower than the prior-year quarter because of a lower amount of sustaining capex.
The company closed the quarter with approximately $835.7 million in cash on hand and securities.
The long-term debt amounted to $388.7 million at the end of September for a long-term debt-equity ratio of 13.6 versus an industry average of 174.40. The company’s debt has a maturity in 2025.
For full fiscal 2017, Iamgold guides production – including joint ventures – ranging between 845,000 and 885,000 ounces at an AISC per ounce of gold sold between $1,000 and $1,040.
Iamgold is currently trading around $5.75 versus the analysts’ average target price of $7.68. The gold producer has a market capitalization of $2.64 billion, a price-book (P/B) ratio of 0.93 and a price-sales (P/S) ratio of 2.33 times. The EV/EBITDA ratio is 2.57.
The company has an enterprise value of $2.32 billion that, considering a total volume of 12.472 million ounces in proven and probable gold reserves, leads to an EVO metric of $186.02, which tells that Iamgold is probably one of the cheapest gold stocks at the moment.
According to the Simple Moving Average indicator set on 200 and 50 days, Iamgold is neither overvalued nor undervalued.
According to the Peter Lynch chart the Canadian midtier gold stock is trading below its earnings line updated with the results on earnings to the second quarter:
The gold stock has a recommendation rating of 2.4 out of a total of 5.
Short-term catalysts to Iamgold are represented by:
- The Côté Gold project which is expected – said Steve Letwin, the president and CEO of Iamgold – "to be a long-life, low-cost mine heading towards development."
- Increased gold recoveries and reduced operating costs expected at Essakane mine thanks to the realization in situ of an oxygen plant and to a solar plant, completion of which is expected before first-quarter 2018 ends.
- An important impact on Rosebel's cost profile from the integration of Saramacca into the plan of the Surinamese mine.
- Westwood mine (Canada) which is expected to still benefit in terms of lower costs per ounce of gold produced as the ramp-up goes on.
Disclosure: I have no position in Iamgold.
