Wellington West Cuts IAMGOLD Target Following Earnings, Maintains 'Buy'

Keeping operating costs under control is the biggest challenge for IAMGOLD Corp. (IAG), according to Wellington West Capital Markets analyst Catherine Gignac. She slashed her target on the stock from C$15 to C$12.50 after the company reported a 54% jump in cash costs in the first quarter. She maintained a "buy" rating.

Toronto-based IAMGOLD produced 218,000 ounces of gold in the quarter, and is targeting one million ounces for the full year. However, the company has encountered a number of challenges as it absorbs the acquisition of Cambior Inc. and becomes a mid-tier producer. Those include a labor disruption at the Rosebel mine in Suriname and high costs at the Mupane mine in Botswana.

Nonetheless, Ms. Gignac believes one million ounces is achievable.

"Relatively higher costs and expansion challenges need to be controlled as IAMGOLD demonstrates steady-state annual production of one million ounces," she wrote in a note to clients. "Three future development projects should bring production and cash flow growth, starting in the next 2-3 years."

At the same time, commenting on the Q1 results, UBS analyst Tony Lesiak wrote that a number of catalysts could impact IAMGOLD shares in the coming months, including an operating permit decision at Camp Caiman in French Guinea, and a production decision at La Arena in Peru. He maintained a "buy" on the stock and a price target of C$11 a share.