Iamgold: Strong Financials Could Offset South American Problems

Iamgold Inc.'s (IAG) strong balance sheet puts the company in perfect position to pursue acquisitions to offset ongoing political headaches suffered by the company in South America, says Blackmont analyst Richard Gray.

Writing in a note to clients following Iamgold's first quarter results, Mr. Gray noted that Iamgold's recent sale of La Arena project for C$48-million plus the company's C$140-million revolving credit facility adds to an already solid balance sheet, which includes C$283-million in cash/bullion and C$5.6-million of long-term debt as of Mar. 31, 2008.

The analyst wrote:

This financial strength should allow the company to aggressively pursue acquisitions, as former growth projects such as Camp Caiman (permit denied) and Quimsacocha (Ecuador uncertainties) have encountered problems.

In the meantime, Mr. Gray lowered his price target from C$9.50 to C$8.25 on Iamgold shares and maintained his "hold" recommendation.

Despite reporting in-line first quarter results, including earnings of C$0.12 per share, Mr. Gray told clients that higher costs are expected to increase by 5% to C$487 per ounce over the next three years.