I once owned IAMGOLD (IAG). I liked almost everything about the company. Liked the near one million ounces of gold produced per year and I liked the $100 million per year cost reduction initiative to begin January 1, 2013. (It did.) I liked five going on six operating gold mines on three continents and I liked exposure to niobium and rare earths in North America.
I liked Steve, Stephen J.J. Letwin, the company's straight shooting President and CEO, when I saw him interviewed on television. I believed he was committed to achieving sustainable growth and creating shareholder value, and I liked IAMGOLD's overall financials - at least I understood the numbers and believed improving upon them was realistic.
I thought the company was undervalued at the time given its price and overall assets portfolio, and too, ready for growth based on my interpretations of a positive EBITDA and other proprietary indicators.
What I was a little apprehensive about was the country risk they potentially faced in Mali and Senegal, but then their intent to focus more on gold production in North America reassured me the company was going in the right direction. I specifically liked the Westwood project in Canada as it off set the country risks in Africa.
I had high hopes for this mid-tier miner based on everything I had learned, and in particular was eager to see Westwood in production. I was all in and long IAM.. err, I was.
Then came the news that Westwood was a disappointment. Ore graded inaccurately. The cut per ton was off initial guidance and so too, went my interest. Was management that incompetent they could believe with certainty the uncertain?
I sold my position the next day, lucky to pad a tiny profit in the short term, but was now disheartened. I liked liking IAMGOLD. I was confident I had found a comfort zone with a gold company I could afford to load up on and stay excited about, and ride its value wagon to higher peaks.
But, as I'm known to say, "that was then and this is now".
Now recently reported drilling results at the Boto project in Senegal confirm the high ore grades expected as well as showing zone expansion. And the company's drilling program is to continue until necessary completion of the National Instrument 43-101 (NI 43-101) (expected this quarter) and before too long a seventh gold mine.
Also increased production in Q1 by 3,000 gold ounces at the Yatella Mine in Mali, and the added processing of Mouska Mine's ore stockpiles, adjacent to Westwood in Canada - an additional 3,000 gold ounces - compensated for the lighter ore grades overall and kept the company's guidance on track for 2013.
Now IAMGOLD and their shareholders, who also recently re-elected the incumbent board of directors, maintain a new air of confidence.
With a market cap near $2 billion and a price-to-earnings ratio south of 7, an attractive semi-annual 0.0125 dividend, and management maintaining its commitment to increased capital discipline - as well the potential country risks proving thus far non events suggesting a trend that may continue, IAMGOLD is starting to smell like a strong gold opportunity again.
Also, an interesting caveat is a dynamic that appeared to work in IAMGOLD's favor.
Because their cost reduction plan was well in place before the price crunch of April 15th, including savings on numerous fronts from fuel management to corporate travel - and too, that the miner was realizing below guidance production costs in Q1 of $787 per ounce ($63 per ounce below its bottom guidance for 2013) IAMGOLD was already in a unique position to respond to those sudden industry challenges. Few competitors were able to do so as efficiently.
Now IAMGOLD is even more affordable and in a better position. Poised to rise, I'd say to $7 - $7.50, this year, and without an overly robust recovering of gold spots. I see a company that's looking better (all things considered): focused management, strong financials, respectable resources, promising potential, etc., and eager to prove it can rise above the stigmas placed upon it earlier.
I may look for that ideal entry point below $5 and load up again. Ranging below $5 is likely to happen before the value wagon takes off for higher peaks.
And also keep in mind shares are still way below their 52 week high. In this opinion, IAMGOLD presents a good opportunity, and for me especially having learned a valuable lesson in patience making a mistake I will not repeat.
What some investors may not agree with me on, however, is that a gold opportunity is also gleaned on the perception of economic conditions either strengthening or weakening. Where I for one am not in camp optimism. You can make a fundamental case, even a technical case in either direction depending on political persuasion or economic outlook.
But for this reason: when it comes to valuing gold mining opportunities, despite all things "company" being properly in line, the catalyst for one's investment is the perceived value of fiat currency - perceptions settle one way or the other. Is the glass half empty or half full? And by virtue of this, a gold mining "opportunity" remains individually speculative.
If you believe Bernanke's Federal Reserve along with the Bank of Japan, the ECB and all other instant-gratification-gremlins printing us into a fiat lull before an imperfect storm is reason enough to board-up the windows and buy flood insurance, then owning the correct gold miners is a great opportunity. It is after all why the opportunity exists - all things considered.
If you believe the opposite is true then you may see the downside risk as significant.
I can't suggest how to act, just help identify an actionable opportunity.
Let's not fool ourselves. Physical gold is a hold not a trade. And holding the correct gold miners in your portfolio for the long haul is in this opinion, another prudent practice. Key word in that sentence; "correct".
Like buying affordable insurance, IAMGOLD is again a buy and hold, long.