1. How to use GuruFocus - Tutorials
  2. What Is in the GuruFocus Premium Membership?
  3. A DIY Guide on How to Invest Using Guru Strategies
Alberto Abaterusso
Alberto Abaterusso
Articles (1000) 

Iamgold Soars on Discovery of Gold Deposit

Company reports results of Saramacca drilling

Shares of Iamgold Corp. (NYSE:IAG) have been surging since May 5 on the back of rising gold prices.

Iamgold has gained 25.8% over the last two weeks and it is now trading around $4.46 per share on the New York Stock Exchange with a price-sales (P/S) ratio of 2.05, a price-book (P/B) ratio of 0.92 and an EV/Ebitda ratio of 5.29.

Over the same span of time, the underlying commodity has gained $18 per troy ounce, or 1.5%, from $1,239.40 per troy ounce on May 5 to $1,257.40 per troy ounce on May 17.

Gold prices cannot be the only catalyst for Iamgold since its peers have also gained over this period. Over the last two weeks, Kinross Gold Corp. (NYSE:KGC) gained 18.60%, Newmont Mining Corp. (NYSE:NEM) gained 6.16%, Goldcorp Inc. (NYSE:GG) gained 6.50%, Barrick Gold Corp. (NYSE:ABX) gained 6.94%, Yamana Gold Inc. (NYSE:AUY) gained 15.57% and Eldorado Gold Corp. (NYSE:EGO) increased 0.30%.

What is boosting Iamgold is its results on production and cash flow for the first quarter of fiscal 2017 and the drilling results the mid-tier gold producer recently disclosed for its Monster Lake and Saramacca projects.

Investors rely heavily on the exploration and development projects Iamgold is involved in. I discussed the Monster Lake exploration project in a previous article. Concerning the Saramacca Project in Suriname, Iamgold has recently reported the results of 78 drill holes the exploration team has conducted on the area to date. The results of its remaining drill holes will be available in June.

The most relevant results from drilling activities Iamgold’s exploration team conducted in the area are highlighted as follows:

  • SMDD17-138: 43.5 meters grading 12.26 grams per tonne of ore.
  • SMDD17-110: 76.6 meters grading 7.74 grams per tonne of ore.
  • SMDD17-130: 46.5 meters grading 3.07 grams per tonne of ore.
  • SMDD17-133: 45.4 meters grading 2.38 grams per tonne of ore.
  • SMDD17-097: 45.0 meters grading 2.70 grams per tonne of ore.
  • SMDD17-125: 31.0 meters grading 3.81 grams per tonne of ore.

What do these drilling results mean and why they are so important to investors?

From these drill holes, Iamgold’s exploration team found at depths ranging from 31.0 meters to 76.6 meters, deposits of minerals characterized by an amazing concentration of gold. From the richest part of the ore body, the concentration of gold in the mineral ranges from 2.38-12.26 grams of gold per tonne of ore. 

The higher the concentration of gold in the ore, the lower the costs of extracting the precious metal from the mineral. The wider the true widths with the highest concentration of the precious metal are, the more optimistic the expectations for future total production from this gold deposit and life of the mine.

When Iamgold acquired Saramacca, the miner expected it would contribute a “potential of between 8 and 40 million tonnes grading between 1.0 and 1.8 g/t Au for potentially 0.5 to 1.4 million contained ounces of gold,” as suggested by previous exploration activities undertaken in the area.

From these assay results, the impression is Iamgold will have a much higher potential bearing gold deposits at Saramacca than initially expected. Furthermore, the fact the area is still open along strike and that a mineralization style of “irregular pyrite-quartz-carbonate veins which locally carry high gold grades” has been recognized in the deposit area are all preconditions to the definition of a high-quality mineral deposit

In addition, since Saramacca is not far from the Rosebel mine in Suriname, the project will not require a lot of resources to hire skilled personnel, build a permanent camp, acquire machinery and provide the site with electricity and the necessary water for the heap leaching process since most of its employees are already in the area. This will also have a positive impact on the other projects Iamgold is advancing because it will have more capital available to spend.

Disclosure: I have no positions in any stock mentioned in this article.

Start a free 7-day trial of Premium Membership to GuruFocus.

About the author:

Alberto Abaterusso
Alberto Abaterusso is a freelance writer based in The Netherlands. He primarily writes about gold, silver and precious metals mining stocks. His articles have also been widely linked by popular sites, including MarketWatch, Financial Times, 24hGold, Investopedia, Financial.org, CNBS, MSN Money, Zachs, Reuters and others. Alberto holds a MBA from Università degli Studi di Bari (Italy), Aldo Moro.

Rating: 0.0/5 (0 votes)


Please leave your comment:

Performances of the stocks mentioned by Alberto Abaterusso

User Generated Screeners

ChabiCurt-Lrg Cap. Fin-5, Profit-7,
jjhgef131 BB
aboer52DN Prof▼5Pred▼1Pi▼5JG▼
DBrizanAM 23Jun2018 1252Ap
DBrizanAM SD23Jun2018 1235Ap
hcjeversgood companies
Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)

GF Chat