IAMGOLD Corp (USA)(NYSE:IAG) is upgraded to ‘Buy’ rating from ‘Hold’ with a price target of $8, raised from $7.50. This price target revision was done at Canaccord Genuity. They reported that a recent tour of the firm’s operations demonstrated productivity improvements and considerable cost savings in most areas.
The firm states that IAG is ahead of schedule in closing the secondary crusher located in Suriname, with additional crushing supply actually ready to become functional in November. Canaccord notes that IAG stock price has plunged ~35% since August and now are hovering at 17% discount to competitors on a price/NAV basis.
The highlights
At the end of 2015, IAMGOLD appeared like an interesting bet as it was witnessing a bad time on the expectations of an increase in the interest rates. Since the start of this year, the securities have made a remarkable comeback and has surged more than 190% as silver and gold prices have rallied significantly. More notably, the upsurge in precious metals prices proved to be positive for the company.
Last quarter, IAMGOLD witnessed a terrific improvement in both cash flow and margins. More explicitly, its gross margins had jumped 36% on the back of higher gold pricing and decline in costs, while the increase in its operating cash flow was at 125%. Cash flow and margins can improve further in 2H2016 as it is on track to post further cost decline.
In 1H2016, IAMGOLD reported 388,000 ounces of gold production at a cash cost of $1,099 per ounce. Looking ahead into 2H2016, the company’s production should be 397,000 ounces, and the firm believes that it is on track to hit this target. Additionally, the firm believes that the production for the entire fiscal will be recorded at all-in sustaining price of $1,050 an ounce.
It suggests that IAMGOLD’s production in 2H2016 will be recorded at a lower cash cost profile. The gold production has to be 397,000 ounces in the second half of this fiscal at cash cost of $1,000 per ounce. It indicates that firm’s margins during this period will be better than margins in the first half.
