We bailed out of Iamgold (IAG) last year because of its gold and niobium mines for in Mali. Now that the troubles with Al Qaeda in Mali have been reduced, we are returning to the shares at a price that is 40% below where we previously sold.
Because of its involvement in Mali, it is cheap for a gold stock, trading at under 90% of its book value and at a p/e ratio of 8.5 times earnings.
The company has about $2 billion in cash, very low debt for a gold miner (12% of its capitalization) and pays a 2.8% dividend which make it attractive.
Iamgold operates the Sadiola and Yatela mines which are at the far southwestern edge of Mali, near the Mauritanian border. It is an equal shareholder in these Mali mines with Anglo Gold Ashanti, which of course is a large operator for which Mali is minor. The mines are very far from Timbuktu.
IAG also owns the large Essakane gold mine not far from the Sahara area where the Mali fighting went on. This is much nearer Timbuktu but actually over the border in Burkina Faso; here it operates without Anglo.
In both countries the government is a minority shareholder, 18-20% in Mali and 10% in Burkina Faso. IAG had cut exploration during the crisis but production went on unabated in all three mines.
In an unexotic area, northern Ontario, the company's Cote mine was upgraded last month based on new production estimates, raising the indicated resources by 114% to 830,000 oz.
Most of its shareholders are institutional and most analysts dislike it; Credit Suisse rates it underperform with a $8.50 target price because of cash flow worries while Soci�t� G�n�rale just raised it to neutral and B of A Merrill dropped it from buy to hold..
It got some of that cash hoard from selling mines in Peru and Ecuador. It reports on Feb. 20. Buy it before. As our contributing analyst Martin Ferera points out, the disarray among analysts means the chances of a sharp move either way when it reports are increased. Buy at $8.80 per share.
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