Iamgold Expands Monster Lake Project's Gold Potential

GuruFocus.com
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- By Alberto Abaterusso

Last week, Iamgold Corp. (IAG) provided investors with an update on Monster Lake, one of the exploration projects in which the Canadian mid-tier gold producer is developing in the Northwest Quebec.


Monster Lake is in joint venture with TomaGold Corp. (LOT.V), a Montreal-based mineral exploration company engaged in the acquisition and assessment of gold mineral properties as well as in exploration and development activities. TomaGold currently owns a 45% interest stake in the Monster Lake property while Iamgold owns a 50% interest stake.

The results of the first 11 drill holes the exploration team did during the winter are highlighted below.

Monster Lake Shear Zone, Megane Zone and Annie Shear Zone:

  • At 4.4 meters from drill hole ML17-190, the miner discovered gold grading 5.21 grams per tonne, which includes 1.3 meters grading 15.99 g/t gold and 1.9 metres grading 9.82 g/t gold, and 0.6 metres grading 25.10 g/t gold and 0.6 metres grading 36.90 g/t gold.

  • At 3.1 meters from drill hole ML17-194, the miner found gold grading 121.67 g/t, which includes 1.1 meters grading 316.89 g/t gold.



Lower Shear Zone:

  • At 1.8 meters from drill hole ML-17-191, the miner found gold grading 85.27 g/t.



What do these drilling results mean and why are they so important for investors?

Let's consider the results from hole ML17-190. The company says that from the drillings of the Main Shear Zone, the exploration team achieved the following results: 4.4 meters grading 5.21 g/t gold, including 1.3 meters grading 15.99 g/t gold.

These findings mean that at 4.4 meters, the exploration team uncovered a gold deposit of valuable mineral with a richer strike of ore localized over a subspace of 1.3 meters in the wider part of the mineralized area.

The values 5.21 g/t and 15.99 g/t refer to the concentration of gold in the mineral. Of course, the higher the concentration, the richer the deposit and the lower the costs associated with the extraction of the metal from the ground.

Very encouraging results also came from the Lower Shear Zone and the Annie Shear Zone. These results must be confirmed by further drilling tests from additional parts of the mineralized area over the next few months, however.

Senior Vice Presiden Craig MacDougall commented on the drilling results, saying he is confident about the discovery of additonal mineral deposits.

"Assays from this winter drilling program continue to return encouraging results, including those from a new zone along the main hosting structure, as well as from a lower parallel shear zone," MacDougall said. "The potential for the discovery of additional mineralized shoots is considered favourable."

Investors should closely follow the development of this project because once Iamgold has completed all the drilling tests, it will be possible to define the gold resources at Monster Lake. With the results expected before the end of this year, they may have a significant impact on the market value of the stock.

What also makes this project interesting is the existence of communications for easy access to the area and a power grid for mining needs once Iamgold is producing at the site. This means the development of the project may not require considerable financial resources to become operational.

Iamgold is currently trading around $4.26 per share and has been uptrending since the beginning of May, following two weeks in which the gold stock lost nearly 21%.

Iamgold has a price-earnings (P/E) ratio of 35.50, a price-book (P/B) ratio of 0.87, a price-sales (P/S) ratio of 1.91 and an EV/Ebitda ratio of 5.30.

For Iamgold, the average target price per share is $5.35. The recommendation rating is currently 2.6 out of five.

Disclosure: I have no positions in any stock mentioned in this article.

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This article first appeared on GuruFocus.


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