IAMGOLD Corp T.IMG

Iamgold: Undervalued and Unpopular

[InvestockReal]

 

 

Iamgold is one of the most undervalued mid-tier producers of gold, period.

And in addition to being undervalued, the company is growing. Already producing ~650koz and building a new gold mine in Canada, Ct gold, Iamgold will be producing around 1 Moz in two to three years.

Production Assets

The main producing assets of Iamgold are distributed between West Africa, South America, and North America.

Rosebel, in Surinam, produces ~240 koz per year with AISCs of $1225/oz, and the mine life extends up to 2033.

Essakane, in Burkina Faso, produces ~400 koz per year with AISCs of $1100/oz. The mine will have similar output until 2026, from then on, the production will be reduced to some 80 koz until 2031

Westwood, in the Abitibi Gold Mining Camp, Canada. This mine stopped last year due to some seismic events. Its activity will, most probably,  be resumed this year, with an estimated production of 50koz, approximately half of the nominal production of Westwood. Iamgold has acquired two properties in the vicinity of Westwood with the idea to further increase the throughput of the mill.

Development Projects

With enormous difference, the main development project of Iamgold is the Ct gold mine. It is expected to start commercial production in 2023, with an initial production during the first five years of nearly 500 koz and AISCs of $600. Iamgold owns 64.75% of the project, which equivalent production will be more than 300 koz per annum.

The second project in the pipeline of Iamgold is Boto gold, in Senegal. The construction decision has not been taken yet, but once the mine starts operation it will add more than 150 koz per year to Iamgold production, at least for 11 years.

Comparison with Peers

If Iamgold is compared with a selection of gold miners of similar size, then it is possible to check how cheap Iamgold is. So let’s see how ranks Iamgold in several valuation items:

Company	Ticket	MarketCap ($M)	EV ($M)	EBITDA ($M)	Net Debt ($M)
Alamos Gold Inc	AGI	3425.8	3152.0	381.40	-273.8
B2Gold Corp.	BTG	5060.7	5015.0	1050.0	-45.7
Eldorado Gold Corp	EGO	2023.9	2023.0	513.17	-0.9
Harmony Gold Mining Co.	HMY	3028.4	3086.0	202.86	57.6
Iamgold Corp	IAG	1596.2	1180.0	413.40	-416.2
New Gold Inc	NGD	1248.6	1544.0	276.00	295.4
Yamana Gold Inc	AUY	4966.0	5879.0	963.70	913.0

S

 

Sound Balance sheet: Iamgold has a negative net debt. And it has almost half a billion dollars of surplus in cash and cash equivalents, almost 40% of the Enterprise Value (EV) of the company. Iamgold has no problems financing the construction of Cte gold, which will take at least $M600. That is a strong point in favor of IamGold. Let’s say that Iamgold will not only not bankrupt in the short to medium term but also is not going to have problems funding the Ct gold mine and there will not be dilutions that will harm the long-term investor. If we compare Iamgold’s net debt with that of their peers, most of them with higher market capitalization, we can see that Iamgold has the best value.

Company	Ticket	EV / EBITDA	Net Debt / EV
Alamos Gold Inc	AGI	8.3	-8.7%
B2Gold Corp.	BTG	4.8	-1.0%
Eldorado Gold Corp	EGO	3.9	0.0%
Harmony Gold Mining Co.	HMY	15.2	1.9%
Iamgold Corp	IAG	2.9	-35.3%
New Gold Inc	NGD	5.6	19.1%
Yamana Gold Inc	AUY	6.1	15.5%

 

Low EV/EBITDA ratio: Iamgold has a terrific EV/EBITDA ratio of only 2.9. When compared with peers of similar size, Iamgold ranks, again, in the first position. Eldorado Gold, the second company with the lowest EV/EBITDA ratio, has a ratio of 3.9, sensibly higher than Iamgold. With this ratio, Iamgold is a steal.

 

Company	EV ($M)	AISC ($/oz)	Reserves (Moz)	Production (koz)
Alamos Gold Inc	3152.0	1050	10	500
B2Gold Corp.	5015.0	900	7	1000
Eldorado Gold Corp	2023.0	1000	18	450
Harmony Gold Mining Co.	3086.0	1555	43	1600
Iamgold Corp	1180.0	1250	14	650
New Gold Inc	1544.0	1500	3.6	400
Yamana Gold Inc	5879.0	1000	15	1000

Showing 1 to 7 of 7 entries

 

Terrific Resources: Iamgold has impressive reserves of gold. More than 14 Moz, which give a very low EV/Reserves ratio, only $84 per gold ounce. The ratio is one of the lowest when compared with similar companies. From the selected companies only Harmony has a better ratio. With the current production, Iamgold has more than 20 years of production covered.

EV/Production ratio: In this case, Iamgold ranks again first. Buying Iamgold at current prices implies acquiring one ounce of produced gold per year at slightly over $1800. Companies such as Alamos Gold, Yamana, or B2Gold are selling at prices higher than $5000.

Company	EV/Reserves	EV/production	Payback (years)	Years of Reserves
Alamos Gold Inc	315	6304.00	8.05	20.0
B2Gold Corp.	716	5015.00	5.37	7.0
Eldorado Gold Corp	112	4495.56	5.39	40.0
Harmony Gold Mining Co.	72	1928.75	6.93	26.9
Iamgold Corp	84	1815.38	3.11	21.5
New Gold Inc	429	3860.00	11.57	9.0
Yamana Gold Inc	392	5879.00	7.05	15.0

Medium AISC: The AISC of Iamgold are around $1200. That means that once Westwood ramps up  and Ct Gold produces the nominal gold production, the AISC will decrease. In an environment of increasing gold prices, that will improve the economics of Iamgold.

Low Payback: Payback is the time that is needed to get the money back from buying one ounce of current gold production. If a certain amount of money is paid for the production of one ounce of gold (EV/Production ratio), then this ounce is sold at the gold spot price, and the costs are the AISC, then it can be calculated how much time is needed to payback. With current values of AISC and gold spot prices, Iamgold has the lowest payback, only 3.11 years. With increasing production, this parameter will improve further.

Increasing production: The ounces produced by Cote and Westwood not only will increase the total production of Iamgold but will also decrease the average AISC of Iamgold. So the economic improvement will be twofold, one of them because of the increase in gold production and the other related to an increase in the margins.

Organic Growth

Ct gold mine construction has already been approved, and it is expected that commercial production will start at the end of 2023. There is a clear construction plan and Iamgold has enough cash to build it. Commercial production will increase significantly Iamgold production at least for two to three years. Also, another good point is that the expected AISC are going to be significantly lower than the current AISCs, so it is expected that the mean will decrease and the economics of Iamgold will be even better.

Merge and Acquisition Target?

With this low valuation, Iamgold is a perfect target for acquisition. Ct gold is a tier-1 mine in a stable jurisdiction, a sweetie asset for the majors. Even if Iamgold does not own completely Cote (a 64.75%) it is an interesting asset that could trigger the desire of different big producers. A hypothetical acquisition, even at a fair premium with respect to the current market cap, will not benefit Iamgold investors.
The management has stated publicly that they are not interested in merge and acquisitions, something that will, in my opinion, harm Iamgold investors as the potential is huge.

What could benefit Iamgold is a merger with a company with similar resources, production, and low valuation. The company that better fits with this description is Eldorado gold, another undervalued company, with enormous resources and a big project, Skouries, coming in line in the next years. A merge of Eldorado and Iamgold will create a close to 2Moz producer, with a strong presence in Canada, diversifying the operating mine portfolio, and therefore reducing the political risks of both companies.

It will be a win-win operation for both companies and their shareholders.

Undervalued and Unpopular

Iamgold is terrifically undervalued. It is undervalued, and it is enormously unpopular, so unpopular that has only 274 followers on Twitter, so few that I will soon overtake them 

Compare them with the 9.6M followers of Tesla, there is some room to improve, isn’t it?
And no, I do not think I will soon overtake Tesla in the number of followers, although I wish. I think that I will not achieve it, at least not in the short-term 

Final consideration

Iamgold is really undervalued: low EBITDA, enormous reserves, terrific organic growth, huge negative net debt, enough cash in hand to fund the construction of new mines, low market cap, unpopular, what else could you ask?

For me, it is clear, so clear that I have been increasing my position in Iamgold.

Expand info in:  https://investockreal.com/iamgold-undervalued-and-unpopular/

[Luke555]

Your synopsis is 100% accurate. Iamgold: Undervalued and Unpopular. Over the years, the incompetent BOD who is driven by greed and power has severely damaged the reputation of the company. The PRESIDENT and CEO (on payroll since 2007) along with his cronies -2 members of BOD in their 70’s and 2 in their mid-sixties are at the end of their careers and are on a power trip. As you adeptly mention

[InvestockReal]

They  succeeded at least to attrack a buyer, myself :), althought only of a few shares. I have entered recently, so two years of wait is fine with me. But I guess that we are going to have quite a few parties as today. POG is going to help a bit.  “Be patient, Sit tight and be Right!!