In a Feb. 12, 2018, research note titled "2017: A Year of Reserve Growth," Andrew Kaip, an analyst with BMO Capital Markets, reported that Canada-based IAMGOLD Corp. (IMG:TSX; IAG:NYSE) released a reserves update. The mining company's new numbers reflect an 86% year-over-year increase to 14.5 million ounces (14.5 Moz) of gold from 7.8 Moz of gold, assuming a price for the metal of $1,200 an ounce. The total encompasses an additional 3.8 Moz at Cote, 1.5 Moz at Rosebel and 1.4 Moz at Boto.
Measured and Indicated resources grew 6% to 24.7 Moz gold. Inferred resources expanded 44% to 8.8 Moz gold.
As for reserve grades, they generally were up at Sadiola but "down marginally" at Rosebel and Essakane," Kaip indicated. At Westwood specifically, reserve grade dropped 13% to 7.7 grams per ton gold, which is "more realistic given mine grades continue to be below reserve grade."
The analyst also noted the results of the recent prefeasibility study done on the Boto project. It shows an after-tax internal rate of return of 13.3% and a net present value 6% of $104 million ($104M). Based on a 1.4 Moz reserve, production is an estimated 100,000 ounces of gold per annum for 13.5 years. Capital costs are an estimated $249M. All-in-sustaining costs are expected to be $829 per ounce for the life of mine. Kaip added that these numbers "have yet to meet IAMGOLD's investment threshold."
To bolster project economics, the company is pursuing a feasibility study for Boto that will consider a 25% throughput increase.
BMO Capital has an Outperform rating and a $7 per share price target on IAMGOLD, whose stock is currently trading at around $6.02 per share.
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Disclosures from BMO Capital Markets, IAMGOLD, Feb. 12, 2018
Analyst's Certification: I, Andrew Kaip, hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities or issuers. I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this report.
Analysts who prepared this report are compensated based upon (among other factors) the overall profitability of BMO Capital Markets and their affiliates, which includes the overall profitability of investment banking services. Compensation for research is based on effectiveness in generating new ideas and in communication of ideas to clients, performance of recommendations, accuracy of earnings estimates, and service to clients.
Analysts employed by BMO Nesbitt Burns Inc. and/or BMO Capital Markets Limited are not registered as research analysts with FINRA. These analysts may not be associated persons of BMO Capital Markets Corp. and therefore may not be subject to the FINRA Rule 2241 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.
Company Specific Disclosures
Disclosure 8A: BMO Capital Markets or an affiliate has a financial interest in 1% or more of any class of the equity securities of IAMGOLD.
Disclosure 8C: BMO Capital Markets or an affiliate has a financial interest in 0.5% or more in the issued share capital of IAMGOLD.
Disclosure 9: BMO Capital Markets makes a market in IAMGOLD.
Disclosure 16: A BMO Nesbitt Burns Inc. research analyst has extensively viewed the material operations of IAMGOLD.
Disclosure 17: IAMGOLD has paid or reimbursed some or all of the BMO Nesbitt Burns Inc. analysts travel expenses.