Iamgold (IAG, Financial) is a good investment considering its process improvement initiatives that will yield better returns in the future. These initiatives are helping the company to reduce its costs radically and making the company profitable at the current gold prices.
The way ahead
Looking forward, Iamgold is probable of realizing greater savings as it plans to implement these initiatives at its other gold mines across the world. These initiatives are not only optimizing the performance of mines but significantly enhancing the grades for its mines. This is yielding generous costs benefits for the company eventually with healthy profit margins.
Meanwhile, the company has recently executed the sale of its Niobec assets for $500 million. This sale will make its cash and cash equivalent to strong $833 million. Moreover, the company has an undrawn credit line facility of $500 million. This will certainly strengthen its balance sheet that has total debt of $676.60 million. With this level of cash position, the company remains quite attractive in the long run. Also, this enhanced cash position will assist the company to make possible gold mine acquisition and concentrate 100% on its profitable gold mines that will increase its chances of growth in the future.
Its production is expected to be in the range of 820,000 to 860,000 ounces of gold, at all-in sustaining costs per ounce between $1,075 and $1,175 for the fiscal year 2015. It plans to ramp up production at its newest mine Westwood that will go for its first full year of production.
Key assets to drive growth
Westwood is a truly flagship assets for Iamgold. This asset has produced 70,000 ounces of gold with cash costs of $822 per ounce and all-in-sustaining costs of $1,031 per ounce since the commencement of its operation in July 2014. This mill produced about 1,500 tonnes per day, with average grades of more than 8 grams of gold per tonne and had recovery rate of 96%. The company expect Westwood to produce between 110,000 to 130,000 ounces of gold in 2015. Iamgold has specific plan for the underground development of Westwood asset that will produce tremendous free cash flows in the future.
Alongside, the company should gain from the enhancement and expansion of its Rosebel mine. The company is excited about the continued progress at its Rosebel mine with improvements in grades and increasing operating efficiency. It expects this mine to produce about 290,000 to 300,000 ounces of gold in fiscal 2015. The company sees additional opportunity at the Rosebel mine to reduce its costs that should certainly add value to its bottom line performance this fiscal year.
Similarly, the company sees great opportunities with its other mines such as Essakane and Malli toreduce costs.
Conclusion
Iamgold is certainly a good investment in the long run. The company has performed well in the past, and analysts expect the company to do well in the future as well. The analysts expect its earnings to grow at CAGR of 3.00% for the next five years with tremendous short term return of 33.30% by next year. The company has operating cash flow of $312.20 million.
