Iamgold Acquires a 19.98% Stake in TomaGold

Transaction may open doors in the exploitation of several mineral properties in North America

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Iamgold Corp. (IAG, Financial) informed the market Tuesday that it has acquired 19.98% of TomaGold Corp.’s (TSX:LOT, Financial) ordinary shares outstanding for a total consideration of $2.5 million.

One ordinary share of TomaGold has been valued at 9 cents and the stake of TomaGold bought by Iamgold equates to a volume of 27,777,777 shares outstanding of the Canadian mineral properties explorer.

Iamgold says that it has not acquired the 19.98% stake in TomaGold with an intention to take control of the Canadian mineral properties explorer.

Iamgold’s future decision that may affect either its ownership or control over TomaGold’s ordinary shares or others of its securities is at Iamgold’s complete discretion and will depend on its evaluation of the Canadian mineral properties explorer’s business and outlook. Over time Iamgold will also monitor Tomagold’s financial condition and future capital needs.

TomaGold is not only engaged in the acquisition and exploration of mineral properties in Canada but is also engaged in the assessment of these properties and their development.

In Canada, TomaGold holds interest in several gold properties in the northern part of the province of Quebec.

In a 50-50 joint venture with Iamgold, TomaGold is developing the Monster Lake project where – as operator of the project – Iamgold is undertaking exploration activities in the aim to define a high gold grade deposit. At Monster Lake Iamgold has completed an exploration project consisting of a total of 10,657 meters for 25 diamond drill holes in total and its stake into the joint venture will increase to 75% as the Canadian midtier gold producer completes extra exploration expenditures over the next four years.

The exploration activities at Monster Lake returned encouraging results from the entire 3 kilometer-long structural corridor, which is composed by the Megan Zone and the two additional zones: the lower Shear zone located southwest and the Annie Shear zone located northeast of the Megan zone.

More results from the Monster Lake project are expected to be released by Iamgold from explorations that its team is conducting on the area following the summer season drillings campaign before the end of 2017. These results with the others already acquired from previous drillings may lead the midtier Canadian gold producer to complete an initial mineral resource estimate.

Since Monster Lake is presented by Iamgold as a high gold grade potential bearing project, the completion of a mineral resource estimate, albeit initial, and its publishing before the end of this fiscal, may have a significant impact on the market value of the stock.

We don’t know whether Iamgold will increase its participation in TomaGold or not in the near future, though this transaction is important to investors as it opens Iamgold’s doors to the exploitation of several mineral properties that TomaGold has in its portfolio. According to the figures that can be found in its most recent balance sheet and thanks to the recent corporate loan refinancing transaction, which has enhanced Iamgold’s financial flexibility, the Canadian midtier gold producer can count on a solid balance sheet and on an ampler margin on how to use its financial resources to continue its explorations at Monster Lake and increase its ownership in TomaGold and other Canadian explorers that hold interesting metallic properties in North America.

Iamgold is currently trading at $5.37 with a market capitalization of $2.493 billion, a price-book (P/B) ratio of 0.87, a price-sales (P/S) ratio of 2.20, a price-earnings (P/E) ratio of 4.89 and a forward P/E ratio of 90.91. When the latter is multiplied by an EPS of 5 cents, as forecasted on average by analysts for full fiscal 2017, yields to a value of $4.55 per share. The EV-to-EBITDA is 2.35.

For Iamgold, the average target price per share is $6.65. The recommendation rating is currently 2.4 out of five. Iamgold has an EVO – enterprise value to the total volume of total proven and probable mineral reserves (ounces) – of $199.63.

TomaGold is currently trading at 9 cents of Canadian dollars (7 cents) with a market capitalization of 10.01 million Canadian dollars and a P/B ratio of 1.91.

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