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Iamgold Reports 2016 Results

- By Alberto Abaterusso

Iamgold Corp. (IAG) recently released its fourth-quarter and full-year 2016 results.

For the quarter, the Canadian mid-tier gold producer generated EPS of one cent, a 106.3% increase from a loss of 15 cents per share in fourth-quarter 2015, and beats analysts' expectations by one cent, generating a positive surprise of 127.3%.

Revenue for the quarter came in at $252.5 million, a 6% increase on a year-over-year basis, and beats expectations by $4.19 million.

During the quarter, the Canadian miner sold 218,000 ounces of gold, a 0.5% decrease from the comparable period of 2015, at an average price of $1,190 per ounce, up $89 per ounce from fourth-quarter 2015. Gold sales cost the company $784 per ounce.

Iamgold closed the quarter with gold production of 215,000 ounces, an 8% increase on a year-over-year basis, at a total cash cost of $740 per ounce and an all-in sustaining cost of $995 per ounce.

As a result, the gold margin was $450 per ounce.

In 2016, Iamgold sold 808,000 ounces of gold, flat from 2015, at an average price of $1,244 per ounce.

For 2016, revenue came in at $987.1 million, a 7.6% increase from $917 million in 2015.

Costs sustained from the sale of gold for the year decreased 8.92% to $884.9 per ounce from $971.6 per ounce in 2015.

During the year, Iamgold produced 813,000 ounces of gold, 7,000 ounces more than in 2015.

The production increase is due to higher gold concentrations at Rosebel and Westwood. The two assets contributed 36.4% and 8% of the company total production. The improved performance at these two mines offset the decreased production experienced at Essakane due to lower gold grades and decreased recovery rate. Essakane contributed 46.5% to the company's total production. Production from joint ventures was flat in 2016 compared to 2015.

Iamgold produced gold at a total cash cost of $739 per ounce and an AISC of $1,057 per ounce. Both figures were lower compared to those of 2015.

Higher gold prices and lower total cash costs for one ounce of gold produced a higher gold margin of $505 per ounce in 2016, a strong increase of 56.3% from the previous year.

The company attributed the gold margin increase to "costs benefiting from significant performance improvement initiatives."

Enhanced operating efficiency at its mines translated into a lower operating cost, enabling Iamgold to generate cash flow from operations of $314.4 million.

The miner ended the year with $762.7 million in cash and securities. The liquidity increased 37% from Dec. 31, 2015 and was moved by more cash flow generated from operations and several other factors.

The company has $485.1 million in long-term debt as of Dec. 31, 2016, a reduction of $143 million from fiscal 2015.

Part of the cash flow and proceeds from the sale of shares were used to fund organic growth through investing in several projects. It aims to upgrade its asset base in terms of increased mine life and gold reserves.

One of these projects is the C?t? Gold Project, which is in the northeast part of Ontario, Canada, where the mid-tier gold producer is determining a mineral deposit. Iamgold has recently released a scoping study for it.

In 2017, Iamgold expects to produce between 845,000 ounces and 885,000 ounces of gold.

Cost of sales are expected to be $765 to $815 per ounce of gold. Total cash costs are expected to range between $740 and $780 per ounce. The AISC are expected to be between $1,000 and $1,080 per ounce of gold.

Capital expenditures are expected to be $237.5 million to $262.5 million.

Iamgold closed at $4.41 per share on Feb. 22, down five cents or 1.12% from the previous trading day, with a volume of 8,713,740 shares traded on the New York Stock Exchange.

The gold stock is uptrending as gold moves higher on the bullion market and has gained 14.55% year to date. It is now trading at 0.89 times the book value and at 8.08 times the EBITDA.

The recommendation rating is 2.8, and the average target price per share is $5.31.

Disclosure: I have no positions in Iamgold Corp.

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This article first appeared on GuruFocus.