I am documenting the Ray Rich Buy and Watch list on my Instablog for comments/thoughts/impressions etc.
I AM Gold (IMG/IAG) is a strong buy in my portfolio and is a industry leader in the Mid Tier gold producers. This is a best in class stock trading at a deep discount mainly because of the total turmoil in the gold sector right now.
IAG is currently trading in the mid 5$ range. I would consider this a buy at this range but bought in the 4.40$ range a few months ago. It may be a good strategy to purchase a position now with the intent on adding if the gold market falls a bit, or if a company like Goldman Sachs decides to go after gold producers again.
There are many reasons to chose this stock, being a deep value player this stock turned up on my screen list closer to the beginning of 2013. It tanked right along with the price of gold and in a lot of cases it tanked faster than many of its peer because of its cost of production.
IAG was on the higher end of production cost for an oz of gold. For this reason it was very highly leveraged to the price of gold and really took a beating.
The management acted swiftly and to be honest with you was originally thought of in the investment community as a weaker management team but in the face of this drop in gold prices now I believe is seen as one of the stronger teams out there.
They acted quickly with a huge cost cutting project and are looking to not only meet those expectations but to exceed them. This will bring the cost of gold mined down to the better than average range. Likely all in costs in the range of 1200/oz.
There has been a lot of the larger gold companies that are cutting dividends. This is one of the places that IAG stands apart. The dividend is very safe, one of the main reasons that it is safe is actually one of the stronger points in why IAG is a strong Buy. They have a Niobium mine in Quebec which produces about 8% of the worlds Niobium, this is a material that actually has a very predictable income stream and funds the dividend nicely making it very sustainable.
IAG does have some debt issued, but it is longer term debt and wont come due for a number of years. This debt is very manageable and even if gold is in a level price range for a number of months/years IAG will be able to handle the debt very well.
These are some of the main reasons that I feel IAG is best in class and a strong component of a deep value portfolio.
Comments are appreciated.
Disclosure: I am long IAG.