The Gold Report - Thu, Nov 9, 2017

Gold Producer Posts Q3 Beat on Lower Costs

BMO Capital Markets reported the Q3/17 financial and operating results for this international, mid-tier gold miner.

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A Nov. 7 BMO Capital Markets research note indicated that IAMGOLD Corp. (IMG:TSX; IAG:NYSE) achieved a Q3/17 headline earnings per share (EPS) of $0.07, which was a beat due to costs being lower than estimated, according to analyst Andrew Kaip. BMO and consensus expected an EPS of $0.02.

The Canadian company's operating cash flow of $77 million ($77M) was exactly in line with BMO's estimate, Kaip noted. Free cash flow of $36M was three times the expected $12M, "as capital spending came in below expectations ($41M versus BMO at $65M)." On this result, IAMGOLD lowered capital guidance for 2017 by $25M to $225M (+/-5%).

Production in Q3/17 of 217,000 ounces (217 Koz) was a slight miss, coming in below BMO's estimate for 223 Koz, "on lower-than-expected production from Rosebel," wrote Kaip. Yet, the company reiterated 2017 production guidance of 845-885 Koz gold.

All costs during the quarter were lower than anticipated. Total cash costs were $771 per ounce ($771/oz) versus the $797/oz estimate. All-in sustaining costs (AISCs), excluding royalties, were $969/oz and compared to the projected $1,059/oz. Consequently, "AISC guidance was narrowed to $1,000-1,040/oz (was $1,000-1,080/oz)," relayed Kaip.

As of Sept. 30, 2017, Kaip added, IAMGOLD had "cash and short-term investments of $810M and long-term debt of $389M, for net cash of $422M."

In other news, a near-term catalyst for IAMGOLD—"by H1/18"—is completion of both a preliminary reserve estimate for and permitting work at the Saramucca deposit, Kaip said. The company "is working towards advancing the project toward production in 2019."

BMO Capital has an Outperform rating and a $5.75 per share target price on IAMGOLD, whose stock is currently trading at around $8 per share.

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