Iamgold Is Climbing Again
- By Alberto Abaterusso
Shares of Iamgold Corp. (IAG) closed at $5.05 on the New York Stock Exchange, down 3 cents or minus 0.59% from the previous trading day with a volume of 22,670,538 shares traded versus an average volume of 13.59 million shares traded over the last 10 trading days and versus an average volume of 8.11 million shares traded over the last three trading months.
Warning! GuruFocus has detected 2 Warning Sign with IAG. Click here to check it out.
The intrinsic value of IAG
Week 24 marked a tumble in the market value of Iamgold. Its shares fell sharply to $5.00 on June 14 from $5.43 of the previous trading day, losing 43 cents or nearly 8% and marking the second tumble at the end of the daily negotiations year to date. This was likely a consequence of a hawkish Fed in the federal funds rate. The decision of the U.S. central bank to raise interest rates approximately a quarter of a percentage point to a range of 1% to 1.25%, pushed Iamgold's product down $20.1 per troy ounce or minus 1.6% on the London Bullion Market to $1,255.40 per troy ounce on June 16 from $1,275.50 per troy ounce on June 14.
When we look at Iamgold's share prices pattern over the last two trading days, we see that the Canadian miner has gained 1% or 5 cents and is uptrending again while Market Vectors Gold Miners ETF - one of the most important benchmarks used by gold stock investors - lost 0.72%.
There isn't any doubt that what is propelling Iamgold again is a renewed interest for the gold stock industry as investors perceive that the upcoming 3% Goods and Services Tax on gold in India could push gold prices higher.
But in the case of the midtier gold producer there are two other reasons which may explain the recent new upside in the market value.
1) Raymond James Financial Inc. reinstated a Market Perform rating on common shares of Iamgold. The investment services company set a target price of $6 per share for Iamgold.
Source: Yahoo Finance
Raymond James confirms its positive rating of shares of Iamgold and still sees an 18.81% upside in the market value of the midtier gold producer. As of today, Iamgold's target price ranges between a low of $3.96 per share and a high of $7.55 per share.
Over the last 12 trailing months, Iamgold got four positive ratings out of a total of six. The most recent positive rating was that one released on May 10 by Credit Suisse (Underperform to Neutral) that followed three other positive ratings the gold stock got last year: TD Securities that increased its rating from Hold to Buy, RBC Capital Mkt. (from Underperform to Sector Perform) and Credit Suisse (Underperform to Neutral).
This year Iamgold was downgraded only once by Credit Suisse; that decreased its rating from Neutral to Underperform. Credit Suisse initiated coverage on shares of Iamgold on Aug. 18, 2016.
2) Last Friday, before market close, Iamgold updated the market with the last results of drilling activities that the midtier gold producer conducted at Saramacca, gold development project in Suriname, not so far from Rosebel mine - one of the company's gold-producing assets - according to the 2017 infill drillings program.
With the results that came from the last 35 drillings out of a total of 113 for 19,689 meters of ground drilled, Iamgold can now finally complete its National Instrument 43-101, which publication is expected sometime in the third quarter.
From the remaining 35 drill holes, the exploration team of Iamgold located at depths ranging from 6.5 meters to 41 meters, ore bodies characterized by awesome gold concentrations. From the ore deposit's richest part, the concentration of gold in the mineral ranges from 2.23 to 10.45 grams of gold per tonne of mineral.
In my previous two articles (here and here) on the Saramacca project, I explained why these results from drillings are so important to investors.
Iamgold is trading at a price-sales (P/S) ratio of 2.24 and a price-book (P/B) ratio of 1.04. The gold company has a market capitalization of $2.3 billion and an Enterprise Value of $1.6 billion for an EV-EBITDA ratio of 7.18.
Disclosure: I have no positions in Iamgold.
This article first appeared on GuruFocus.
Warning! GuruFocus has detected 2 Warning Sign with IAG. Click here to check it out.
The intrinsic value of IAG
