RE:IMG EarningsThanks for posting the IMG link for the Q1/15 conference call ng9221. It's actually the most significant bit of information that we have ever seen regarding the future of the MXI with respect to IMG. Here's why:
IMG CEO Letwin has now specifically stated that the potential takeovers in North America are too rich for them and won't give them the returns they require. Both Letwin and Exploration VP McDougall affirm that the new company strategy is to leverage their existing assets which they believe will bring higher returns. That is the reasoning behind looking to go forward with Sadiola in whole or in part, and why they are now highly focused on Boto.
So there has been a huge paradigm shift with IMG. It appears that they have largely given up on the strategy of a takeover of an existing operation and will focus on brownfield and greenfield developments as they state they feel they have enough good prospects right there to get them over the 1 million oz/year production target.
While they can't yet state there will be a mine at Boto, the way they are talking about it, and now mentioning Siribaya in a call like this, the probability of a mine development at Boto being announced next spring is so high that it could be considered a foregone conclusion barring unusual circumstances. And we all know what that means: they must buy out Diakha and Siribaya to improve the economics of Boto.
So the bottom line is this: MXI is now further derisked because IMG is looking to expand internally with Boto so the competition for IMG's capital for Boto/Diakha is suddenly reduced. One of my concerns with IMG has been that they would blow their capital on some bad money pit elsewhere and cripple other projects such as Boto/Diakha. It appears now that isn't going to happen.
One more major development with IMG. They have been trying to reduce African exposure for a few years now. That has now changed according to Letwin. He was asked specifically about that and he now has no qualms about moving ahead with a higher concentration of African activity such as Sadiola and Boto because they are now more driven by the bottom line of projects. Letwin noted that in 25 years of producing in Africa, they have never lost one production day due to political reasons. The political risks of Africa are largely mythical and it appears that Letwin has looked at the hard facts and now realizes it too.
The risk associated with MXI now comes down to one thing only: drilling results. As long as drilling results continue in 2015 similar to 2014, the risk gets lower daily.
I would encourage MXI investors to read the transcript of the conference call as it will affirm that internal projects are now the top priority for IMG's capital allocations, and Boto/Diakha is right up there at the top.
Q1/2015 Conference Call Transcript