First-quarter results boosted shares of Canadian mid-tier gold producer Iamgold Corp. (IAG, Financial)Â 8% to $6.15 per share in after-hours trading on Tuesday.
The production of attributable gold increased 7% on a year-over-year basis to 229,000 ounces, thanks to record-highs reported by the miner at Essakane and Westwood,Â
A higher output enabled Iamgold to feed the market with a greater volume of gold. In the first quarter of 2018, Iamgold placed on the market 235,000 ounces of gold. Compared to the analogous of 2017, that was 11% growth.
Iamgold billed gold customers $1,331 per ounce of metal sold, leading to quarterly turnover of $314.5 million. That was 21% growth from the prior-year quarter. Iamgold beat consensus on revenues by $13.31 million.
Despite higher cost of sales, the company reported an improvement in the gross profit and in the bottom line. The adjusted net profit was 9 cents per share of Iamgold, an 800% increase year-over-year or $40.4 million. Iamgold also beat consensus on net earnings by 8 cents. The substantial progress in the bottom line led the company to achieve 58% growth in the cash flow from operations to $106 million.
For the entire year of 2018 Iamgold left the guidance on production of attributable gold unchanged at 295,000 to 310,000 ounces level. The miner anticipates using funds for $130 million as capital expenditure. A 35% portion will be spent for assets maintenance and the rest for business growth purposes.
The earnings announcement produced an 800% positive surprise that pushed the market value per share above the 200 SMA line. The stock, which is not cheap, was already trading above the 100 and 50-SMA lines.
The stock in Iamgold is costly because the share price is 18% from the 52-week high of $7.25 per share. The 52-week low is $3.64. The share price is 51% up this year.
With an average target price of $7.65, the room for more upside is narrower. Therefore, if I were an investor, I would wait for a weakness in the market value of the stock.
Seasonal rain, which is a regular phenomenon at the Surinamese Rosebel, limits access to the bottom of the pits, where the ore body is characterized by a higher concentration of the precious metal in the mineral. That, as well as maintenance at the processing plant, will impact throughput and costs in the second quarter.
Lower gold production in the second-quarter is also expected at Essakane (90%) and Westwood (100%) as a result of mill maintenance at the asset in Burkina Faso and lower ore grades at the Canadian mineral deposit.
Therefore, I foresee catalysts in the second part of fiscal 2018 when the production at Rosebel mine will be higher. We are talking about a mine that contributes for 30% to 35% of Iamgold’s total production of attributable gold.
More jumps in the market value of Iamgold are expected in the second half of the current year and after the estimation of mineral reserves at Saramacca, the improvement of gold recovery rates at Essakane and the finalization of a feasibility study for the Boto Gold project in Senegal.
The $95 million cash payment related to the divestment of the Canadian Côté Gold Project’s 30% interest stake will also positively impact the share price of Iamgold. An announcement is expected to occur before the end of 2018.
The total liquidity of Iamgold Corp totaled $856.3 million. In addition, the chart below illustrates the trend in production of attributable gold and sales volumes over the last five fiscal years.
(Disclosure: I have no positions in any stock mentioned in this article.)
