Seeking Alpha
Growth, gold, base metals, oil & gas
Profile| Send Message| ()  

We have been evaluating the country risk associated with precious metal mining companies in a recent series of articles and in the present article we would like to do so for IAMGOLD (IAG).

IAMGOLD is a gold mining company with operating mines and development projects in Suriname, Canada, Burkina Faso and Mali. IAMGOLD has a market capitalization of $2.1B. The forward P/E is currently listed as 8.18. Analysts on Yahoo.com give a median price target of $8.50 with the share price standing at $5.56 at the time of writing. IAMGOLD's dividend presently yields a respectable 4.5%.

We used eight individual sources and collated a table of country risk ratings for jurisdictions in which US-listed precious metal miners are active in. The risk ratings from these eight sources were then averaged into compounded country risk scores for each country. Our compounded country risk ratings range from 0 to 100 with low numbers indicating low risk and high numbers indicating high risk. The most recent results from this work can be found in this article.

Definitions of country risk include factors such as political risk, exchange rate risk, economic risk, sovereign risk, transfer risk, socio-economic risk and others. Depending on the source, various contributing factors of country risk are weighted differently. Readers interested in the specific definitions are encouraged to follow the links to our sources given in this article.

In 2012 IAMGOLD produced 830,000 gold-equivalent ounces of gold. The table below gives the 2012 numbers for production, reserves and resources at each of IAMGOLD's mines and projects.

(click to enlarge)

The second table below shows summations for each country of exposure calculated in percentages of gold-equivalent ounces. Country risk ratings are also shown in the central column of the table. The right side of the table shows the weighted risk contributions for each country separately for production, reserves and resources with summarized scores in the bottom line. The individual ratings can be interpreted as ratings going from present risk (production) into the future (inferred resource).

(click to enlarge)

Observations

The country risk rating for IAMGOLD based on production computes to 65.42 indicating high country risk with a slight increase from last year's rating owing to the situation in Mali where 15% of 2012 production has taken place.

This rating increases to 62.71 when considering mineral reserves.

However, when taking into account resources the country risk rating drops dramatically to 47.73 for measured and indicated and 28.80 for inferred resources indicating only moderate country risk.

IAMGOLD has divested the high country risk Quimsacocha mine in Ecuador to INV Metals (OTC:ILNLF) resulting in a considerable stake in this company. However, direct exposure to Ecuador is now history and instead IAMGOLD is developing three promising projects in the low risk jurisdiction of Canada. This development points to a much lower country risk going into the future. The diagram below compares risk ratings derived for last year's constellation with this year's results and illustrates the described turn of events for IAMGOLD which seems to be morphing into a much lower country risk investment proposition.

Note: last year's statistics did not differentiate between different resource classes

(click to enlarge)

Source: Exposure To Country Risk: IAMGOLD Edition