Iamgold Corp. (IAG, Financial) announced more encouraging drilling results from its Boto Gold project June 1 through a news release published on its Web site.
Boto Gold is an Iamgold wholly owned project that is located in West Africa – in the eastern part of Senegal.
The Canadian midtier gold producer has updated its drilling program with the last 24 drillings for a total of 2,842 meters drilled that the miner did at the Malikoundi deposit and at Malikoundi North extension.
The following are the most important results from the drillings that Iamgold’s exploration team did at the Malikoundi deposit and at Malikoundi North extension.
Malikoundi Deposit (deepened holes)
- Drill Hole DBDD-2201: 37 meters grading 1.83 g/t gold and 19 meters grading 3.28 g/t gold.
- Drill Hole DBDD-2261: 42 meters grading 1.26 g/t gold.
- Drill Hole DBDD-2266: 77 meters grading 4.35 g/t gold.
- Includes: 9 meters grading 11.76 g/t gold.
Malikoundi North Extension:
- Drill Hole DBDD-2321: 14 meters grading 1.64 g/t gold.
- Drill Hole DBDD-2322: 22 meters grading 1.79 g/t gold.
Source: Iamgold’s news release
What do these drilling results mean and why are they so important for investors?
Let’s consider the results from the hole DBDD-2201. The Canadian miner says that from the drillings, the exploration team achieved the following result: “37 meters grading 1.83 g/t gold and 19 meters grading 3.28 g/t gold.”
These findings mean that at 37 meters the exploration team found a deposit of valuable minerals, and it has also found a richer strike of ore over a subspace of 19 meters in the wider part of the mineralized area.
The values 1.83 g/t and 3.28 g/t refer to the gold concentration in the mineralized width. When the average grade that measures the concentration of the precious metal in the ore is high, it means that the deposit is rich in gold and therefore the operating costs will be low. A low average grade is an indication of a poor deposit in gold, and the costs associated with mining may be high because extracting one ounce of gold from the mineral will require more efforts in terms of more expensive techniques employed and the sustainment of higher energy costs.
Extracting gold from poor mineral deposit will have negative repercussions on the company’s economics and on the market value of the stock if the precious metal will not trade sufficiently higher to adequately cover all the costs for producing and selling the metal. This does not seem to be the case in the Boto Gold project.
From the Malikoundi North Extension, the exploration team of Iamgold successfully uncovered the highest gold concentration – 1.79 grams of gold per ton of ore – over a 22 meters subspace. These results came from hole number DBDD-2322.
Craig MacDougall, Iamgold’s senior vice president, Exploration, commented on the drilling results: "With the last round of drilling results now in hand from our drilling program at the Malikoundi deposit, we are working to update the resource model for use in our ongoing technical evaluation of the project. Our drilling activities are now focused on targeting possible resource expansions at the Boto 5 and Boto 6 deposits."
The results are important for shareholders of Iamgold because the company is defining a high-grade gold deposit at Boto in Senegal in terms of gold concentration in the mineral and extension of mineralized areas.
The exploration team is uncovering a good storage of precious metal in the ground from where the Canadian miner will add a considerable amount of ounces of gold to its total production.
As of Dec. 31, 2016, the deposit had an indicated resource of 1.56 million ounces with an average grade of 1.8 grams of gold per tonne and a further 125,000 ounces in inferred resources grading 1.3 grams of gold per tonne.
Of course, further exploration activities must be done on the area to move up gold resources to the category of gold reserves and determine how many ounces of the precious metal Iamgold can dig up from Boto once the project is completed. Once the company has completed the so-called National Instrument 43-101 we will know more about the economic viability of this project. The preconditions for a robust project seem to be there.
Iamgold is trading at $4.37 per share with a price-sales (P/S) ratio of 1.96 and a price-book (P/B) ratio of 0.90. The Enterprise Value to EBITDA is 6.24.
Disclosure: I do not own shares in Iamgold.
