IAMGOLD Corp. (IAG, Financial) tumbled 8.26% to $3.33 per share on the New York Stock Exchange on Wednesday, following the issuance of third-quarter results for fiscal 2018.
While Iamgold Corp. met expectations on non-GAAP earnings, posting a loss of 1 cent per share, the mining company missed on GAAP earnings by 1 cent. Iamgold Corp. posted a GAAP loss of 2 cents per share.
The third quarter was worse than the third trimester of 2017 when the Canadian mid-tier gold producer reported a net profit of 7 cents per share, both on a GAAP and non-GAAP basis.
Essentially, the loss was the result of a lower metal price and an increased all-in sustain cost, which squeezed the gold margin to $377 per ounce from $513 per ounce.
Iamgold Corp. also missed consensus on revenue, because it reported a quarterly sales turnover of $244.8 million, reflecting an 8.9% year-over-year decrease, versus an average prediction of $266.17 million. The loss in third-quarter revenues resulted from a lower volume of gold placed on the market and a lower gold price. The sales volume decreased 3.8% to 202,000 ounces, and the average realized gold price declined 6% to $1,207 per ounce.
Third-quarter sales volumes were influenced by lower production. Due to lower throughput and head grades that the company experienced at the Rosebel mine in Suriname and at the Westwood mine in Canada, the attributable gold production decreased 4.1% to 208,000 ounces.
A lower throughput impinged on costs as fixed expenses were spread over a thinner base. Higher sustaining capital expenditures and the payment of a lump-sum in accordance with a new Collective Labour Agreement also determined an increase in costs. Higher capital expenditures were due to increase maintenance and the sustainment of deferred development expenses. As a result, the all-in sustain cost per ounce of metal sold increased 12.1% to $1,086.
Having employed a higher amount of funds in the third quarter for sustaining capital expenditures does not change Iamgold Corp.’s guidance for full-year 2018, which remains at $160 million. Instead, the portion of funds that the company projects to use as growth capital has been lowered to $145 million from the previous $165 million, as Iamgold Corp. has budgeted to spend $20 million less on mineral projects. Amid the most important mineral projects, the Canadian mining company is deferring the spending for expanding mineral reserves at the Rosebel mine through the incorporation of higher ore grade reserves from the nearby deposit of Saramacca.
Since Iamgold Corp. is still projecting to produce between 850,000 and 900,000 ounces of attributable gold in full fiscal 2018 and the sustaining capex is left unchanged, the all-in sustain cost consequently is also kept at $990 to $1,070 per ounce of metal sold in the entire year. The miner is also confirming that cost of sales will range between $765 and $815 per ounce and total cash costs will be between $750 and $800 per ounce.
For the aforementioned reasons, Iamgold Corp. produced a lower cash flow of 11.4 million from third quarter 2018 operations compared to a cash flow of $77 million from third quarter 2017 operations.
The company said that the balance sheet remains strong with cash on hand and short-term securities totaling $744.5 million at the end of the third quarter. The amount also includes restricted cash. The total available liquidity decreased nearly 8% from Dec. 31, 2017, because the cash flow generated from the company’s operations wasn’t enough to offset what Iamgold Corp, spent on fixed assets, exploration activities, financial costs and investments over the same period.
The stock has fallen 45% to a market capitalization of approximately $1.7 billion for the 52 weeks through Nov. 7. The share price at close Wednesday is below the 200-, 100- and 50-day simple moving average lines.
The share price at close Nov. 7 is just a whisper away from the 52-week low of $3.32 and over 95% from the 52-week of $6.52 per share.
The price-book ratio is 0.56 versus an industry median of 1.74.
The 14-day Relative Strength Indicator is 47.62 of a historical 30 to 70 range.
The recommendation rating is 2.2 out of 5 and the average target price is $7.65 per share.
Disclosure: I have no positions in any securities mentioned in this article.
