PsychologyIt's interesting to look at Iamgold from the point of view of human psychology. It is clear from what Mr. Letwin has publically said a year or two ago that he expected the price of gold to be much higher than it is now, and he put out the figure of $2500. While he was careful not to posit a timeline, he was not talking ten years kind of thing. This was around the time of the Cote Lake purchase. From the information we have been given one can surmise that Cote Lake is going to be very expensive to build and won't make much profit at current prices - in other words, the buy was a bet by the company on a higher price of gold. They got carried away by the climate of rising gold prices and did not foresee the bear market. It was a gamble, pure and simple.
The psychology part is in the study of what they have done since. A gambler always goes back to the bet and says that this time it will be different. All he needs is for this or that to happen and he's good. Gamblers always gamble. So it is not a surprise to see them still dabbling in early stage operations like Toma, Tolima, and the properties in Brazil and Africa. To me it seems like mines that may come out of this stuff are a long way away, and positive cash flow may be five or probably more years from now from the first of them to become a mine. What do the smart people at Goldcorp, Yamana, Agnico Eagle, Barrick, Primero, and Newmont do? They know that an operating mine is better value for money spent than a prospect, because they know the odds. They only put money into sure things, even though they cost more. On the other hand a gambler bets despite the odds, down to his last penny, even borrowing in fact (can you say corporate bonds?), and he has to be lucky to win. So the bottom line is, do you want management that bets your money, or plays it smart? It seems with Iamgold we are stuck with the former. I suppose as long as we understand that Iamgold is gambling with our money, and that we in turn are gambling by owning the shares, we have no-one to blame but ourselves when we lose.
It is frustrating to see that they seem to have no concept of the value of shares. Many acquisitions use shares as part or all of the purchase. A higher share price makes it easier to buy. So why does Mr. Letwin boast about being a low-cost producer in a time of low gold prices? Granted higher prices will put a rocket under the share price, but nobody can predict a higher price, and doing so and being wrong makes a person look foolish. Similarly, why does Pug sell 500,000 shares into the open market over a few months when the share price is at an all time low? Why are large numbers of options dished out to people who really don't deserve them? For example Mr. Letwin was recently given 500,000 options at $4.38. If the world was fair he would get the options at the price of the company when he joined it. For the shares go down, for him to not suffer any penalty, and then for him to profit when it finally (I hope!) recovers, is just greed. They do it because they can, not because they have done anything remarkable. Meanwhile, where's our dividend? Mr. Letwin can make one million dollars personally if the share price rises to $6.38, and you can guarantee that there won't be a dividend reinstated before that happens. We'll be lucky to see one before the shares hit ten dollars.
Iamgold needs leadership that does not gamble. That the Chariman of the Board is prepared to dump a half million shares on the market in the space of a few months, when the share price is already beaten down, is a sad thing to see