I have several gold mining stocks in my portfolio as I believe they offer good value at current prices, and do not reflect the rapid rise in the price of gold over the past five years. I have both small cap names like Aurizon Mines (AZK) and large caps like AngloGold Ashanti (AU) among my overall mining positions. One mining stock that has caught my eye because of its valuation and a recent acquisition and a key divestiture is IAMGOLD (IAG).
IAMGOLD - "IAMGOLD Corporation, a mid-tier gold mining company, engages in the exploration, development, and production of mineral resource properties. It primarily explores for gold, silver, zinc, copper, niobium, diamonds, and other metals". (Business Description from Yahoo Finance)
6 reasons IAG has substantial upside at just over $12 a share:
- The company just announced an over $500mm acquisition of Trelawney Mining. This comes on the heels of the company selling assets to Gold Fields Ltd (GFIJ.J) for $667 million in cash in June. In effect, the company has sold assets in risky Ghana for assets in much more stable Canada.
- Even after the acquisition, IAG has a strong balance sheet with net cash on the books.
- The stock has a good dividend yield (2%) and has doubled its dividend payments over the last couple of years.
- Earnings are expected to march smartly higher over the next few years. The company made $1.08 in FY2011, and analysts predict $1.32 a share in EPS in FY2012 and $1.64 in FY2013.
- The company more than doubled operating cash flow from FY2009 to FY2011 and the stock is selling at just over 8 times trailing OCF.
- The stock is considerably under analysts' price targets. The median analysts' price target for the 14 analysts that cover the stock is $20.75.