IAMGOLD Corp.: So Much Gunpowder But Nothing Happens
Summary
- IAMGOLD Corp. recorded $297.4 million in revenues and earnings per share of $0.04 in Q1 2021.
- Production in the quarter was 156K Au Oz lower than I was expecting due to lower production at Westwood and Rosebel.
- I see value in this company, especially below $3.10.
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Investment Thesis
Canada-based IAMGOLD Corp. (NYSE: NYSE:IAG) reported first-quarter of 2021 on May 3, 2021.
The company recorded $297.4 million in revenues and posted earnings per share of $0.04. Production for Q1 2021 was 156K Au Oz lower than I was expecting due to lower production at Westwood and Rosebel.
IAMGOLD has underperformed the VanEck Vectors Gold Miners ETF (NYSEARCA: GDX) slightly and is down 9% on a one-year basis.
The flagship mine Essakane in West Africa represents 65.4% of the company's total output in 1Q'21.
The company presents excellent liquidity and has no net debt. It's a huge positive for the long term, but somehow all those great financial ingredients never developed to a proper stock valuation.
With liquidity of ~$1.5 billion described below, the company will fully fund Côté Gold, estimated at $875 million to $925 million, with overall project completion at 18% now. Full production is expected in 2024.
Source: Presentation
The investment thesis for IAG remains the same. I am definitely not impressed with the stock performance in general, and the story looks like a broken record: Great financial and poor stock performance, great financial and...
However, I see value in this company, especially below $3.10. There is great growth potential with Cote gold and Boto gold. Hopefully, patience will pay off.
However, I recommend trading short-term your long-term position here. About 40% is reasonable.
IAMGOLD - Financial Snapshot 1Q'21 - The Raw Numbers
| IAMGOLD | 1Q'20 | 2Q'20 | 3Q'20 | 4Q'20 | 1Q'21 |
| Total Revenues in $ Million | 274.5 | 284.6 | 335.1 | 347.5 | 297.4 |
| Net Income in $ Million | -34.4 | 25.5 | -11.60 | 59.0 | 19.5 |
| EBITDA $ Million | 37.1 | 105.4 | 72.30 | 161.1 | n/a |
| EPS diluted in $/share | -0.07 | 0.05 | -0.02 | 0.13 | 0.04 |
| Operating Cash flow in $ Million | 44.0 | 72.4 | 105.10 | 128.7 | 101.7 |
| Capital Expenditure in $ Million | 67.8 | 69.4 | 73.2 | 106.8 | 102.5 |
| Free Cash Flow in $ Million | -23.8 | 3.0 | 31.90 | 21.9 | -0.8 |
| Total cash $ Million | 802.2 | 838.1 | 897.2 | 947.5 | 967.8 |
| Long-term Debt in $ Million | 419.1 | 401.9 | 471.2 | 466.6 | 466.7 |
| Shares outstanding (diluted) in Million | 470.1 | 476.3 | 473.8 | 474.7 | 475.5 |
Data Source: Company release
Gold Production And Balance Sheet Details
1 - Revenues were $297.7 million in 1Q'21
The quarterly revenue came in at $297.7 million, up 8.3% from the same quarter a year ago. IAG posted an income attributable to equity holders of $19.5 million, or $0.04 per share.
Gordon Stothart, President, and CEO of IAMGOLD, said:
In the first quarter 2021, the IAMGOLD team made good progress toward our operating and development goals. Our operations generated $89.5 million in mine-site free cash flow and we ended the quarter with approximately $1.5 billion in available liquidity.
Production was strong at Essakane and as expected at Westwood’s Grand Duc open pit, with Rosebel and satellite Saramacca impacted by unusually heavy seasonal rains and COVID-19 restrictions. We completed the CIL mill upgrade at Essakane and continue to expand camp capacity at Rosebel.
2 - Free cash flow is estimated at a loss of $0.8 million in 1Q'21. 
Note: Generic free cash flow is the cash from operations minus CapEx. The CapEx has been estimated and will be revised when I will get more information. The free cash flow per mine site is not comparable.
Free cash flow has been a recurring struggling matter for many quarters. IAG's trailing yearly free cash flow is now estimated at $56.0 million and a loss of $0.8 million in the first quarter.
I believe the company should pay a dividend here or use some of the cash to retire the debt or use a share buyback program.
The last dividend paid by IAMGOLD was a quarterly dividend of $0.125 per share in July 2013 according to nasdaq.com.
3 - Gold production details. Total production was 156K Au Oz in 1Q'21
IAMGOLD produced 156K Au oz during the first quarter of 2021 (gold sold was 153K Au Oz) compared to 170K Au oz during 1Q'20, or down 8.2%, as you can see in the graph above. Production was down 7.7% sequentially.
Source: Presentation
The total cash costs were $1,052 per ounce produced.
All-in sustaining costs, AISC, were $1,238 per ounce sold for the first quarter, which is very high compared to the gold industry average, around $970 per ounce. As we can see above, Westwood and Rosebel mines had weak production. In the press release:
Rosebel experienced an unusual amount of seasonal rain, twice the volume as in the same period in 2020, resulting in soft road and ground conditions, and water accumulation on benches during and after rain events.
Below are the historical prices of gold and AISC.
The 2021 guidance mid-point was 665K Oz, up from 655K Oz in 2020.
4 - The company has no net debt and strong liquidity
IAMGOLD has no net debt and total liquidity of approximately ~$1.5 billion (including the largely undrawn credit facility of $500 million and not including restricted cash) as of the end of March 2021.
Source: Presentation
It remains the company's strength for many quarters, but it has not helped the stock much.
Conclusion And Technical Analysis (Short Term)
IAMGOLD Corp. is really disappointing as a long-term investment. The company shows a great financial position and tremendous potential growth with Cote Gold and Boto Gold mine.
Furthermore, the gold mineral reserves P1 and P2 are good with 13.937 Moz and could translate to an excellent cash flow down the road.
However, all this potential seems to disappear like tears in the rain when it comes to shareholders. I believe the company must do some serious soul searching.
Technical Analysis (Short Term)
IAG forms an ascending wedge pattern with line resistance at $3.5 and line support at $3.15. The trading strategy is to sell about 40% between $3.5 and $3.7 and accumulate below the 50MA between $3.2 and $3.
Warning: Those numbers cannot be precise, and the TA chart must be updated often to be helpful in your search for the best path strategy. I am offering here a quick interpretation only. I regularly update the TA chart for my subscribers through my over 80-stock tracker.
Watch the gold price like a hawk.
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This article was written by
I am a former test & measurement doctor engineer (geodetic metrology). I was interested in quantum metrology for a while.
I live mostly in Sweden with my loving wife.
I have also managed an old and broad private family Portfolio successfully -- now officially retired but still active -- and trade personally a medium-size portfolio for over 40 years.
“Logic will get you from A to B. Imagination will take you everywhere.” Einstein.
Note: I am not a financial advisor. All articles are my honest opinion. It is your responsibility to conduct your own due diligence before investing or trading.
Analyst’s Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in IAG over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
I may accumulate IAG below $3.10 again but more certainly below $3.
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