18% rise in price of gold has led to a 40-60% rise in several gold mining stocks. Even IAG has done great with a near 68% rise from the 52 week low made on June 26. It has appreciated by more than 20% after the earnings release earlier this month. Importantly, the company managed to achieve 55% of the cost cutting target, and hence lowered its cost guidance for 2013. It is on track to achieve the $100 million target by the end of 2013. The guidance for total cash costs was reduced to $790-$840/oz from $850-$925/oz. All-in sustaining costs guidance was reduced to $1,150-$1,250/oz from $1,200-$1,300/oz. Though the actual costs were below the previous guidance, there was a yoy increase. The all-in sustaining costs in Q2'13 were $1,196 an ounce, which was an increase of 10% from $1083 per ounce in Q2'12. Even for H1'13, the costs came in 17% higher at $1239 per ounce compared to $1057 in H1'12. The company maintained its production guidance for 2013. Despite the recent rise, IAG is now trading at ~16 times forward earnings. The price to book ratio is around 0.67. The next few quarters can be better because of expected lower costs, and higher average price of gold in Q3'13. Analysts have give a $1470 target for gold. If the current momentum continues, that may happen soon. However, there may be intervening corrections to test the mettle of this rally. Investments in gold mining stocks may increase, and recently Pershing Gold (PGLC), a development stage company, obtained more than $20 million in funding which may help it develop its properties in Nevada and start production in 2014. So things are much better than what they were a few weeks ago, and those who dared to buy around the lows, may have made good money already. IAG needs to keep working on cost reduction.
IAG doesn’t mine rare earth elements. It owns undeveloped REE mineral deposit, located close to Niobec mine (this mine produces niobium, valuable minor metal using for special steels). Niobec expansion that may also involve REE development depends on company finding a partner to provide funds and share risk. As of now, IAG has many development priorities and Niobec is not high on the list.