At $1,186.3 per troy ounce, gold was higher on Monday after bottoming out last week. The metal closed at $1,178.4 per troy ounce on the London Bullion Market on Aug. 17.
For the second half of 2018, analysts are predicting gold will approach a price of $1,300 per troy ounce. That is a more than 9.5% growth gap to fill.
A recovery in the Chinese yuan plus a stabilization in the U.S. dollar will help gold to rise quickly from current levels, according to analysts. A record in the net-short position of money managers in gold futures and a resuming physical demand of gold will decisively push the commodity toward $1,250 to $1,300 price levels. Money managers accumulated more than 66,000 ounces in gold futures last week, a more than 55.5% growth in their net-short position from the previous week.
Lower prices are also encouraging Indian consumers, stimulating the aggregate physical demand of gold. India is the world's second-largest consumer of the precious metal after China.
Investors who may want to take advantage of rising commodity prices can do so by investing in U.S. publicly traded gold producers, one of which is Iamgold Corp. (IAG, Financial).
Why do I recommend Iamgold over other gold mining companies? Because of its high gold volatility, shareholders of Iamgold will experience one of the most fruitful stock appreciations as the underlying commodity rallies.
Shares of Iamgold have fallen 33% so far this year to $4.1. The company has a market capitalization of $1.94 billion on the New York Stock Exchange.
Operationally speaking, the Canadian mid-tier gold producer should benefit from an increase in the volume of proven and probable mineral reserves at Essakane Gold Mine in Burkina Faso. Essakane is one of the company's three producing assets. The other two mines are Rosebel Gold Mine in Suriname and Westwood Gold Mine in Canada. The increase in gold reserves at Essakane is going to significantly impact the miner because nearly half of its total production comes from the deposit. An expected improvement in gold recovery rates will also be supportive.
Having closed the second quarter of 2018 with an output of 214,000 ounces of attributable gold, the miner's management is convinced it can feed the supply side for full fiscal 2018 with a gold production of 850,000 ounces to 900,000 ounces. The volume projection includes joint venture operations.
Concerning costs, the company is leaving projections made at the beginning of the year unchanged. Cost of sales is forecasted to be $765 to $815 per ounce, the cash cost at $750 to $800 per ounce and the all-in sustaining cost at $990 to $1,070 per ounce of gold sold.
With a financial strength rating of 7 out of 10, GuruFocus is indicating Iamgold's balance sheet is solid enough to sustain growth through the advancement of core projects.
To continue executing on projects, the company will use cash flow from operations and liquidity available on hand. The miner has approximately $832 million in cash on hand and securities. Including an available line of credit, the company’s total liquidity increases to more than a billion dollars.Â
The guidance on capital expenditures has been lowered to $325 million.
Iamgold has a price-book ratio of 0.68 versus an industry median of 1.74 and an EV-to-EBITDA ratio of 4.55 versus an industry median of 9.30. The 52-week range is $4.01 to $7.25.
The recommendation rating is 2.2 out of 5. The average target price is $7.65 per share, which is a mean of 13 estimates ranging between $6.25 and $9.05.
Disclosure: I have no positions in any securities mentioned in this article.
