IAMGOLD upgraded at Macquarie
By Jonathan Ratner
IAMGOLD Corp. was upgraded to outperform from neutral at Macquarie Capital Markets after the recent underperformance of the company’s shares.
The stock has fallen roughly 25% since the gold miner reported earnings on February 23, while its peer group has dipped an average of just 13%.
Macquarie analyst Tony Lesiak noted that IAMGOLD currently trades at 0.58x net asset value, compared to the larger cap group average of 0.67x. He also highlighted the company’s $1.3-billion cash position and its two unsecured revolving credit facilities that add up to $750-million.
Based on current gold prices, Mr. Lesiak expects IAMGOLD’s operating cash flow will be adequate to internally fund organic growth opportunities such as the expansion of its Sadiola gold mine in Mali, West Africa.
He also noted that IAMGOLD continues to consider options for unlocking value at its Niobec Niobium mine in Quebec – through a partnership or an IPO. However, the analyst doesn’t expect any major developments in the next 12 months.
Mr. Lesiak has a $20 price target on IAMGOLD shares and cited several potential catalysts for the stock. They include a definitive agreement with the government of Suriname (home to its Rosebel gold mine) in the second half of 2012, regional exploration at its Essakane gold mine in Burkina Faso, and an expansion decision for Sadiola in the second half of 2012.
“Further production growth is expected from acquisitions. With IMG’s large cash balance, they continue to be potential acquirers of a development asset with the potential to produce +150kozs in Canada, West Africa, or South America,” Mr. Lesiak told clients. “While market distaste has risen to potentially acquisitive companies, IMG has a track record of accretive
deals and has reiterated its aversion to using its paper given current valuations.”