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IAMGOLD Corp. Message Board

  • investora2z investora2z Dec 1, 2013 9:35 AM Flag

    At the bottom of the range

    The correction in gold has run deeper than expected, but now it is very close to the strong support of $1200. The possibility of rebound is high, and the better valued stocks can be considered for long term investment. The best part about Iamgold is the dividend yield. Presuming that gold rebounds, these levels may appear extremely attractive in hindsight. Investors are already at 6% yield when they buy the stock. The high probability of rebound adds to possibility of capital appreciation. Iamgold is now trading at less than half its book value, and despite the adverse price scenario, has been able to achieve a net profit margin of 6% on a ttm basis. The operating margins are nearly 25%. The debt of $639 million is also not too bad if one considers the cash of $368 million. The trailing P/E is 17 and the forward P/E is around 15. The price to sales is around 1. The problem is the cost of production. At $1134 per ounce, the all-in-sustaining costs are high compared to many peers. For IAG, the costs increased 10% on a yoy basis in Q3. There are even some development stage companies with lower expected cost of production like Pershing Gold (PGLC). IAG is on track to achieve the targeted cost savings, and the impact may be more prominent in the forthcoming quarters. The company had announced a $100 million cost-reduction program at the beginning of the year. The target was for reduction in operating costs by $54 million, exploration expenditures by $40 million and corporate general and administrative costs by $6 million. The company has achieved 77% of planned reductions by the end of Q3 with savings of $38 million in Operations, $35 million in Exploration and $4 million in Corporate. So the company seems to be taking the right steps, and appears to be a good bet at current levels. However, gold needs to hold and rebound.

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